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The Top-Rated Asian Stocks

Can CAPS help you find the continent's hottest companies?

Following a tremendous streak of double-digit annual returns, the Chinese and Indian stock markets have hit a speed bump so far in 2008. As of March 3, China's Shanghai Exchange was down 17.8%, and India's Bombay Exchange had given up 15.6% for the year.

It's been a pretty bad year across the board for the two emerging-market darlings. According to Capital IQ (a division of Standard & Poor's), 104 of the 118 Chinese and Indian stocks that trade on major U.S. exchanges are down in 2008. Those hit hardest include Chinese solar plays like Solarfun Power(NASDAQ:SOLF), Trina Solar, and Motley Fool Rule Breakers pick Suntech Power(NYSE:STP) -- three stocks that had each more than doubled in the previous year.

Investors worldwide must be wondering whether this is a sign of things to come for stocks in these emerging Asian giants. Nowhere, perhaps, is the debate livelier than on Motley Fool CAPS, the Fool's investing intelligence community, where more than 85,000 investors rate their favorite -- and least favorite -- stocks.

Moving westward?Even though stocks from other regions, including Europe and South America, have become more common among the top-100 rated CAPS stocks, Asia's growth potential remains too great to ignore.

Without further ado, here are the top five Asian stocks, according to CAPS.

Company

Country

Philippine Long Distance Telephone(NYSE:PHI)

Philippines

Silicon Motion Technology(NASDAQ:SIMO)

Taiwan

iShares MSCI Taiwan Index

ETF

Internet Initiative Japan

Japan

BLDRS Asia 50 ADR Index

ETF

Please bear in mind that these stocks are not formal recommendations. Instead, they're offered as jumping-off points for further research. Researching five-star CAPS stocks such as these can be an effective tool for investors.

Favorable FormosaDespite the ever-present political risks stemming from its icy relationship with China, Taiwan has proven itself a promising yet largely overlooked destination for high-growth investors. Tech stocks like GigaMedia(NASDAQ:GIGM), AU Optronics, and Siliconware Precision Industries(NASDAQ:SPIL), for instance, have been winners over the past five years, returning 2,094%, 254%, and 377%, respectively.

The publicly traded Taiwanese companies are generally large and tech-oriented. In fact, more than half of the iShares MSCI Taiwan Index is weighted in tech companies like Taiwan Semiconductor(NYSE:TSM). Moreover, many of these tech stocks pay dividends -- the ETF, for example, pays a 2.9% yield. Taiwan Semiconductor alone doles out 3.7%.

Investors should also take note that presidential elections in Taiwan are expected to take place on March 22. In January, the Kuomintang party won parliamentary elections, giving the markets hope that relations between Taiwan and China would improve. Another Kuomintang party win on March 22 could make the market smile.

CAPS player karmst04 echoed these sentiments in January. "With elections in Taiwan over and a democratically elected official who is open to trade with mother China, Taiwan should see a great profitability from the outcome of the elections."

What do you think? Should investors let promising politics into their portfolios, or should they be more wary of China-Taiwan relations? To make your voice heard, join the CAPS community. It's 100% free, and we want to hear from everyone.